How is the Maximum Simulated Drawdown calculated in the Nexus Challenge/Funded?
Note: The Maximum Drawdown Limit is a fixed limit set at 8% of your initial account balance. It applies in all three phases and on the funded account. It is static: it does not trail, and it never resets. All examples in this section use a $100,000 account, where the limit is $8,000. The rules, formulas, and breach level calculations work the same way for every account size.
The rule at a glance
| Item | Rule |
|---|---|
| Maximum Drawdown Limit | 8% of the initial account balance ($92,000 breach level on $100K) |
| Type | Static. Fixed to the initial account balance and does not trail. |
| Formula | Breach Level = Initial Account Balance − Maximum Drawdown Limit |
| Direction | The breach level never moves. Profits do not raise it and losses do not lower it. |
| What is checked | Equity and balance, including open and closed positions, commissions, and swaps |
| Applies to | Phase 1, Phase 2, Phase 3, and funded accounts |
| If breached | Hard breach. The account is terminated immediately. |
Breach level by account size
| Account Size | Maximum Drawdown Limit (8%) | Breach Level |
|---|---|---|
| $5,000 | $400 | $4,600 |
| $10,000 | $800 | $9,200 |
| $25,000 | $2,000 | $23,000 |
| $50,000 | $4,000 | $46,000 |
| $100,000 | $8,000 | $92,000 |
What is the maximum drawdown?
- The maximum drawdown works like an account-level stop-loss.
- On a $100,000 account, equity must stay above $92,000 throughout the trading period.
- The breach level is fixed to the initial account balance. It does not trail your profits.
- Unlike the daily limit, it never resets. It applies for the entire time the account is active.
Balance vs equity
- Balance updates only when a trade is closed.
- Equity moves in real time and includes floating P&L from open trades.
- Both equity and balance must stay above the maximum breach level at all times.
- Floating losses, commissions, and swaps all count, even before a trade is closed.
How the breach level is calculated
Breach Level = Initial Account Balance − Maximum Drawdown Limit ($8,000 on a $100,000 account)
In the table below, Room to Breach assumes no open trades.
| Current Balance | Breach Level | Room to Breach |
|---|---|---|
| $97,000 | $92,000 | $5,000 |
| $100,000 | $92,000 | $8,000 |
| $105,000 | $92,000 | $13,000 |
| $110,000 | $92,000 | $18,000 |
- The breach level stays at $92,000 no matter how your balance moves.
Do floating losses affect the maximum drawdown?
Yes. Floating losses reduce your equity in real time and can breach your account before any trade is closed.
Example:
- Your balance is $95,000 and your breach level is $92,000.
- An open trade reaches a floating loss of $3,000 or more.
- Your equity touches or falls below $92,000, and the account is breached, even though no trade was closed.
Do profits raise the breach level?
No. The breach level is static, so profits give you more room but never move the level up.
Example:
- Your balance grows to $110,000.
- Your breach level stays at $92,000.
- You have $18,000 of room before the maximum breach level. The 4% daily limit still caps how much you can lose each day.
Do commissions and swaps count?
Yes. All commissions and swaps are included in your equity.
Example:
- Your balance is $92,050 and your breach level is $92,000.
- Swaps and commissions on an open trade total −$60.
- Your equity is $91,990, which is below $92,000, so the account is breached.
Which limit applies first?
- The daily and maximum limits run at the same time.
- Whichever breach level is higher is the one your account reaches first.
Example:
- Your balance at the reset is $95,000.
- Your next daily breach level is $91,000 ($95,000 − $4,000).
- Your maximum breach level is $92,000.
- The maximum level is higher, so it is the one that applies.
What causes immediate termination?
- Your account closes the moment equity or balance touches or falls below the maximum breach level.
- This can be caused by:
- Floating losses on open trades
- Closed losses
- Commissions and swaps
- The Daily Loss Limit is a separate rule and is explained in the Nexus Daily Drawdown article.
Remember
- The Maximum Drawdown Limit is always 8% of your initial account balance, in every phase and on the funded account.
- The breach level is static. It does not trail and never resets.
- Both equity and balance must stay above the breach level at all times.
- Keep an eye on both the daily and maximum breach levels. The higher one is the one you'll hit first.
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